On The World's Reserve Currency: What's Past Is Epilogue

Simply put, "it does not last for ever" should be ringing in the ears of every investor in the world with more than a few millisecond return horizon. And neither do any and all chartalist conventions which rely on the articial construct of reserve permanence, for one simple reason - being artificial, means the theory is flawed from the beginning. But it is JPMorgan's Michael Cembalest who frames it the best, "I am reminded of the following remark from late MIT economist Rudiger Dornbusch: 'Crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.'"

His opening made me feel better though...he viewed this as taking second place since Santorum has no money or real supporters other than Jim Bob Duggart! LOL. He was being interviewed on CNN in Iowa an hour or so ago, fucking hilarious!

And here comes Gingrich.....talking about how only HE speaks the truth....get the fuck outta here!

Looks like the 2012 election will be another made for television, Shithead(D) v. Shithead(R) affair, brought to you by your oligarchical overlords. I would suggest you at least buy silver, but the response would probably be 'silver a bubble'.

Freedom isnt free, and apathy and ignorance also come at a cost. Looks like your going to get the political representation you deserve.

IMPORTANT - Watchthevote2012 has reported discrepancies in the following counties so far (all to the downside for RP):

Lucas

Adams

Adair

Cass

All small discrepancies to be sure, but the larger the county, the more difficult it is to tally and monitor manipulation. As such, any voter fraud would most easily be recognized in the smallest vote counts.

Oh and just my two cents: if Ron Paul doesn't win the nomination, I say we torpedo the Republican candidate's chances of winning by splitting the vote via write-ins. That way the RP/libertarian/not retarded bloc of Republican voters become absolutely necessary for winning elections.

Assuming, of course, that elections will even exist or matter 4 years from now...which is a big assumption...sigh...

agreed. the GOP has gotta burn or they'll never learn. not that they are capable of learning, but they might remember for the next election. not that they'll promote anything other than more sheister plastic men, but...ugh

An open caucus state, with past & present O'Barry voters wringing their hands nervously up until the last possible moment, trying to decide on the weakest candidate of all to place on the ballot to oppose their Messiah...help elevate...Santorum?

One saying he made money from laying off workers and the other saying he had many more layoffs under his watch...one saying he imposed healthcare socialism on a state and the other saying he imposed it on the entire country.

Its a bona fide race to the bottom...lol...but Romney will be chosen to oppose O'Barry, its the only way the bankers win.

US will start WWIII when it sees fit in order to preserve US paper hegemony - only this time the "flight to security" won't last very long.

The entire world is sick of US hegemony. Except US' new BFF - France. God knows what US whispered in ther Frenchies' ears... something that would make them go against Germany's demand that bondholders, banks and investors should participate in losses - and on top of that push for new sanctions on Iran including freezing Iran's Central Banks' EU assets.....

Do you see the light, Bitchez... are you connecting the dots....France is frying some US Freedom Fries for Barry -

oh yes, the world is topsy-turvy and totally fucked - and the only sane politician in the empire is declared "unelectable".... well if so, the US and the world will truly and irrevocably fall apart. You see, the MSM potato heads don't realize that US hegemony IS THE PROBLEM - not, what keeps it together, but will destroy it.

What should we expect? A hard fight. No one gives up their empire with a shrug. Get dirty now, folks. Tell the born agains about Mormonism's freakish and cult-ish elements. If you want Ron to win - you must fight NOW!

Look at the bright side; this is becoming a very expensive election for status-quo-seeking PACs to buy. They have had to put money on Romney, Gingrich, Bachmann, and now Santorum. Paul-supporters are getting value for their dollar in the information wars by placing only 1 bet: bleeding the beast while gaining political support.

How about we discuss the fact that the other reserve currencie above were denominted in gold and silver (except the end of the pound sterling's tenure). The dollar, once domestically and internationally backed, is the first true fiat standard, thus why it will fail more missriably than any other. The quadrillions of derivatives would never come about if it wasn't for this fact, because you can't print that much wealth. Now it revolves above our heads like a giant cloud of doom in the sky. How much longer the Central Bankers can run this shitshow, who knows, but they can't run it this way much longer. The math doesn't add up, unless we are all going to be millionares soon.

I've been wondering how exactly a country can establish a 'reserve currency' if it is truly backed by gold. If it is truly backed by gold, then isn't gold itself the reserve 'currency'? In what way was (for instance) Spain the issuer of a reserve currency in the 1500's? What does this mean? That there was a preponderance of Spanish coins in other countries' treasuries? That Spanish coins were more widely recognized (and thus traded at a lower spread) than other sovereigns' mintings? That Spanish government notes of credit were widely traded in lieu of specie?

I understand how we can say the UK pound sterling was a reserve currency, because they were afforded the 'exorbitant privilage' of having people trading their paper notes at par specie value even when they inflated. (Until they didn't, of course. Bye, bye, Britannia).

The Spanish inflation was not due only to ships full of New World looted gold coming into Spain, it started in the 1300s as the population came back from the Black Death. Eventually Spain over-reached as all empires do and all the money on earth couldn't save them. Sounds familiar!

I think modern derivatives will come to be seen in comparison to French fiat inflation notes: money that was a complete construction of deluded fiction and eventually proved to have zero value. John Law's mortgage-backed notes were an historical "kick the can down the road". It won't be a pretty story, as Marie Antoinette found out.

Some new reserve currency or international construct will replace the dollar and its value will be benchmarked against gold. That's why CB buy and keep gold. That's the real bottom line in today's fiat accounting.

1) had a policy of selling any other country's fiat for gold, as soon as they had it deposited with them, and

2) floated their own fiat currency against gold, and

3) bought and sold gold for their own fiat at a price determined by a ratio of their gold holdings and the amount of fiat on issue.

Why wouldn't this work? Countries that printed or ran a huge deficit would be "punished" with a high price of gold but that would attract gold to the treasury coffers (especially if taxes could be paid in gold as well). I think this is the solution proposed by FOFOA but I'm not sure. So this is a blend of fiat and a gold standard.

well santordumb means we are all on our own, i mean talk about fucked up,,,,,,this man shouldn't be close it worries me about the populace i realize iowa is a different breed but this is so fucked up....i'm now considering canada based soley on the stupidity of the populace. Its no wonder the state of this country,,,,,,

If lennon above is right and I think he is on a long enough timeline what the heck good is a passport going to do you? Where do you go? No where with out a portable fortune you can get across borders and that description does not include 99.9999% of us..

Getting money across borders is getting harder and harder although there are a few avenues left. Although PM proponents tend to attract detractors on here the facts and history support this as being one of the few options available for the upcoming collapse of the financial system and by extension PM miners are a decent proxy with natural leverage; however if you are timid of roller coasters you best get a supply of depends before proceding.

Many folks think they lack the ability to invest in PM's to any significant degree, and while true of most of us it is equally true that this is where the junior miners can come into the equation. Clearly PM's have been beaten like a dog over the past decade iand a half with the intensity of the beat down increasing as we approach the banking system implosion; by extension the junior miners have been beaten even harder making solid prospects with very interesting projects available at bargain basement prices.

Or if you think PM's are an overhyped bunch of bullshit you can buy beans and flour and hunker down for what comes next.

The decision is yours to make but given the available choices playing the the junior PM miners for a while and converting gains to PM's stored overseas then using your passport to find your way to Belize or Costa Rica or Paraguay. As Lennon noted several months back {paraphrasing} - each time the Crooks beat the PM's down it gives you another shot at freedom.... your call

Last Year, I bought 10 bricks of coffee at $2.00. This Year $2.75 same brick and same brand. It was a very nice profit. The only problem is I drank the profit and the original investment. But seriously, You can use your FIAT to buy stuff that you will need, and it will give you a better return than the bank.

Costa Rica is not what it used to be. Try less populated countries to migrate. Uruguay has the easiest residency in the planet. Best advice go to the country of your choice and live there for a few months. I am from one of these countries, and the US is still far better IMHO.

We're not gonna hear the truth the American people know is in fact real.'Stand next to that Heartland trucker and you'd be on your way Mr. Freedom! The American people have more than just a right to be safe in their own home "from the intrusions"...it is what sustains whatever endeavor the PTB wish to engage in..."out there." since when did the American people's freedoms become "the problem"? We're the Vanguard here...but sometimes it takes time for time to catch up.

Sure, some here will hope for an RP comeback. They should be commended for doing so. But it's oooooooooooooovvvvvvvvver. Time to give up on the dream of having a country worth believing in and get yours.

Give up the dream spacemonkeys! My ZH uncle B9K9 has already quit this site. Dude is probably in Guantanamo as we type.

True story (which no one cares about) - I once had a 267 page Word document of B9K9 comments from this site (sad maybe, but true for me). Tragically it was lost in a boating accident (along with my physical silver - LOL) but true nonetheless.

Anyhow here's a classic B9K9 for all of us: he who complains has already lost.

If you are a true RP believer - campaign harder. And if you don't think he can win, get some more canned beans tomorrow. Either way, make tomorrow count!

You missed on the top bar, skip. The US abandoned the gold standard in 1971. We have been disguising the ride down with bullshit, missiles, and reserve status until the other central banks discovered that their county's (or countries') aggregate debt levels were even more untenable than ours. With some minor arm twisting, they now play the ponzi prance with us. Happy 2012.

The US$ is and will remain the worlds's reserve currency because the US military protects the world's shipping lanes and the Saudi's price oil in $'s. The US will and has used its vast military power to keep the US$ as the world's currency. This is a circular process with the $ allowing for near infinite deficit spending which in turn is used to further the US military power which in turn ensures the US$ remains at the top. There will be a war before the $ falls. It has nothing to do with debt to GDP or credit rating. The credit rating fell and rates declined and the demand for Treasuries increased. There are no valid alternatives. The Iowa vote of about 100,000 is a complete joke. Hell I live the SO. CA with 5 million people who could care less about how a few dumb ass hicks in Iowa vote or say. Obama must be laughing as his media powers make the Republicans look foolish.

Seems like a great plan Tempo, until it's not. Uh, it's not. Printing money out of thin air to bomb innocent people is not a strategy. And when the killing of innocent people comes to within it's own borders, that's when you know the game is over.

It's the ability to project power. Each of the "world powers" in the graph above had the ability to project power which made economic transactions "safe" so commerce could grow.

Each one lost the ability to project power as they could not spend enough to maintain their military superiority over those around them. Soon they were cutting their military, asking for help from other nations to pay their fair share... All the stuff you've been hearing on the news for the last 20 years.

England had the cheap and inexpensive gunboat. Now we have the 21st century equivalent, the remote control drone. Cheap, can go anywhere, undetected, and rain death from above.

Apparently when Americans log into their computers after a 2-week holiday and sees the price of silver in the $26-$28 range they raid the US Mint shelves (via Gainesville, APMEX, and local shops) like the gaming crowd on the first day of the Play Station 4 release!

If you are one of the human beings that find this spinning little marble called earth your home and aren't in the privileged political class, you better be praying your ass off that Ron Paul wins. Unless you're counting on that some mutant giant white swan is going to come shit on your head. Ron Paul is one of the last reasonably sized tickets that has any chance of successfully avoiding absolute disaster... But maybe you are one of those weirdos who aspire to live in a mad max movie. There's no accounting for taste. Maybe you have acquired a discerning palate for dog food.

RP is not going to happen. People will not listen to Your message because too many of them now depend on hand outs. They don't give a shit what happens to their neighbors or their country. I don't know if I can blame them. The soup line is a scary place especially at night.

Don't worry. We won't see Mad Max in our lifetimes. The middle class will just get smaller and smaller. The rich will still be rich and the poor will still be poor. Less Rich and More poor. We can't help that (history). You can only place your bets and hope You levitate from middle to the top. Very few will. That is how it always happens. Moving to another country will not help either. Enjoy Bangladesh ORI while You still can. Maybe before when the economy was not global, you could have hidden in a negative correlated country like Japan used to be many decades ago.

I had the great displeasure of being in a Wal-Mart today. This proved to me that Ron Paul will have a problem getting traction. It also showed why Obama is president today. I know it's going to be a rough sled to make liberty mean something again. But it's worth it.

Pat Caudel, dumb ass that he is, said Ron Paul supporters are just like little children throwing a temper tantrum, showing their displeasure with a situation. I say fuck him. We're showing our displeasure with George the 41st, BillyBob, George the 43rd, and Barry. We want more Andrew Jackson, Thomas Jefferson types. That's why my bumper sticker has a pciture of George Washington saying, "I'd vote for Ron Paul."

Why do people believe the government is a tool to impose their moral values on other? Bunch of Morons. Every time, government infringes on the freedom of others, they are doing it on yours too. I defend the gay rights not out of love for them but because I protect my own freedom that way. If they succeed with them, I know that I am next.

As a Citizen of Communist Massachusetts(the wife won't move until the parents die), who has regained his Sovereignity(well then, as I am married, am I a true king to myself?), FUCK THE UNITED STATES OF AMERICA CORPORATION! Ron Paul!!!!

Tyler, all the prior reserve currencies were based on gold and silver, including the US dollar until 1971. A gold or silver coin from 1500 or whatever has held it's value. It's the confetti of paper money that always seems to end up worthless. nonetheless it seems Europe will implode first, dragging gold and silver down with it given current correlations. So I'm waiting for that to happen or the charts to regain their footing, then I add more of the barbarous relic.

Yes, but at least even a dummy knew when Diocletian was debasing the currency. The common man wasn't fooled by euphemisms and double-speak. Bad money drove out the good. The gold standard isn't perfect (in that it can still be diddled by politicians), but Hayek had the right idea when he suggested to wrest the monetary system from government control: Hayek - A Free Market Monetary System http://mises.org/daily/3204

Exactly, silver kept is value. The coins just had less of it as the legend suggests (silver content). Also, that wasn't the only time this has happened in history. As a matter of fact it tends to be more the norm than the exception.

Gold and silver currencies have not always mitigated inflation or mitigated it well. Gold from the mines of the Americas flooded 17th-century Spain with money, creating serious inflation and driving up the cost of goods. Spanish merchants began to purchase cheaper goods from English craftsman. The result was an outsourcing of production and know-how from Spain to England leading to the fall of Spain and the rise of England. Sound familiar? As an investment, however, gold and silver seem sound compared to much that is out there (bonds especially).

True, but that was a historically unprecedented and one-time occurrence due simply to the raping of the Native Americans' vast supplies of gold and silver that had been mined and accumulated over millenia, and then suddenly injected into the relatively PM-poor European economy. Such an event could NEVER happen again, unless perhaps a solid-gold asteroid happens to land on earth.

The US dollar should be seen for what it is......a mechanism for allowing the US to live on credit and run wars it can ill afford whilst redistributing the remaining wealth to an ever smaller percentage of the population.

Apart from that, it's still the only thing people know as being able to be used for exchange. This ignorance and necessity for exchange will keep it going for a while longer.

Mind you, the lack of any alternative paper currency helps quite a bit.

Gold is the best protection but there is an intellectual vacuum out there when it comes to precious metals.

The chart is rather misleading if not disingenuous, as all the currencies highlighted before the 19th century were gold-backed "hard" monies (with the exception of the John Law period in France, and the post-revolution mandats and assignats), and so in essence it was not the Portuguese, Spanish, Dutch or French currencies which constituted "reserves", but GOLD and SILVER. Indeed, the first three mentioned nations did not even issue any form of paper currency until well into the late 18th century at the earliest, so fiat-ness had nothing to do with their currencies losing any putative "reserve status".

Come to think - off the top of my head - perhaps the real 'value' of any international means of exchange is a combination of military might and the internal stabilty of whichever seat of empire imposes its dictats.

Quick reflection leads me to suppose that my theory might be valid, especially if the psychological dimensions of trust, confidence, respect, fear, etc. are added - the erosion of which will cause others to look for alternatives; as is happening right now, as the Washington Empire declines both abroad and "at home".

Tyler, that disingenuous post is something that I might have expected from RobotRetard, but not you.

I'm frankly shocked that you would make such a bullshit argument. It was not silver, nor gold, that depreciated there, it was a DEBASED CURRENCY that fell in value due to the serial dilution of the denarius that led to its decline in value, a decline which had NOTHING to do with gold or silver in and of themselves, both of which maintained their value during that same period.

Akak.... never seen a clipped coin? More recently, the UK pre-65 silver currency had a smaller fraction of Ag... also compare US-Can exchange rate history

Unlike other currencies in the Bretton Woods system, whose values were fixed, the Canadian dollar was allowed to float from 1950 to 1962. Between 1952 to 1960, the Canadian dollar traded at a slight premium over the US dollar, reaching a high of US$1.0614 on August 20, 1957.

The Canadian dollar fell considerably after 1960, and this contributed to Prime Minister John Diefenbaker's defeat in the 1963 election. The Canadian dollar returned to a fixed exchange rate regime in 1962 when its value was set at US$0.925, where it remained until 1970.

As an inflation-fighting measure, the Canadian dollar was allowed to float in 1970. Its value appreciated and it was worth more than the US dollar for part of the 1970s. The high point was on April 25, 1974, when it reached US$1.0443.

Based on these exchange rates, the coins were subject to arbitrage... (not that it happened much)

Um? You seem not to have noticed that, whatever a currency was backed by (oil with the USD since 1971), each and every "reserve currency" has run its course as the main, internationally accepted means of exchange for trade.

Considering that all such currencies (prior to 1971) were gold-backed and FAILED after a hundred years or so, a contrary argument could be that either gold had no effect, or even might have been detrimental ... possibly especially for the Portugese and Spanish who plundered S America and shipped gold in large quantities, much to the delight of English pirates lol.

OK I am playing Devil's Advocate to a degree, but I'm just pointing out that your criticism of the chart is invalid.

Second - You are basically saying that gold is only as good as the laws which protect it. I think you have a problem there? Think on it, e.g. in the context that just about everything depends on some law AND that governments make (and break) laws with impunity.

Second - You are basically saying that gold is only as good as the laws which protect it. I think you have a problem there? Think on it, e.g. in the context that just about everything depends on some law AND that governments make (and break) laws with impunity.

***************

Yes-that is exactly what I'm saying-

If the sacred US constitution can be shredded-what hope do we have of ever maintaining an honest money system-what hope do we have of ever maintaining an honest governmental system-

Considering that all such currencies (prior to 1971) were gold-backed and FAILED after a hundred years or so, a contrary argument could be that either gold had no effect, or even might have been detrimental ...

Actually, that is simply untrue, and a complete misrepresentation of monetary history.

While currencies (which were gold-backed and "hard" by definition) did lose value in the 16th century due to the flood of looted New World gold and silver entering the European economy, it is simply untrue to say that any thereby "failed" --- both the Portuguese and Spanish currencies, which were NOT debased during this period, continued to circulate as they had before, merely at a discount due to the falling price of gold and silver.

I question the chart above, as the very concept of "reserve currencies" did not even EXIST until the 19th century, when supposedly gold-backed paper currencies began receiving widespread use. Before that time, it was simply GOLD and SILVER which constituted "reserves" --- the exact minted form, or nation of origin of the coinage thus hoarded, was largely irrelevant.

currencies (which were gold-backed and "hard" by definition) did lose value in the 16th century due to the flood of looted New World gold and silver entering the European economy

I doubt this is true, quantity has no bearing on value, it is quality that determines value. If currencies lost value during the 16th century it was for the same reason as currencies today are losing value, that is, the issuer is bankrupt. Just because large amounts of gold & silver were being imported into Europe doesn't mean it was flooding into the coffers of those issuing the currency, in fact, the coffers of those issuing the currency most likely contained the IOU's of those issuing the currency.

Actually, you would be incorrect in your doubts --- the values of both gold and silver did indeed drop markedly in the 16th century, due solely to the vast and relatively sudden increase in the amount of specie circulating through the economies of Europe --- this is not my opinion, but historical fact. Indeed, monetary historians know this period as "The Price Revolution", and it was obviously noted and much commented upon, and lamented by, many who experienced it at the time. The price inflation thus produced went a long way toward destroying what nascent manufacturing base Spain had managed to develop up to that point, and actually materially contributed to Spain remaining a backward, agriculture-based economy. The huge influx of gold and silver also fueled a whole series of vastly expensive, mostly pointless, offensive and imperialistic military campaigns and boondoggles such as the Spanish Armada sent against England in 1588, which in the longer run only contributed to the decline and ultimate collapse of the Spanish Empire.

Gold & silver devalued against what? More likely it was the issue of the Spanish government, whether it be irredeemable promissary notes or debased coinage that was devalued, thus the 'Price Revolution'. The Wars were most likely a major contributor to the devaluation, not the other way around, no different to today.

I'll tell you once more, quantity is not what determines value. Your historical 'facts' are wrong.

I am sorry to tell you this, and I mean no offense in doing so, but you are simply wrong here, and embarrassing yourself in trying to discuss a topic of which you clearly are ignorant.

No, the Price Revolution had NOTHING to do with any Spanish coin debasement (as there was no such debasement), nor did the wars lead to the devaluation of gold and silver, but mostly followed the fall in the value of the precious metals. And while a number of other factors undoubtedly did play a minor role in the Price Revolution, and have been seized upon by a few recent historical revisionists to advance their particular pet theories, it was both widely recognized in it its own day, and for centuries afterward, as having been the direct result of the vast importation of gold and silver looted from the New World, as well as to a lesser extent that metal which was mined there by the Spanish during and following the looting.

Yes, in this case, quantity did in fact determine the value of the (hard) currency of the day, as there was simply suddenly much more of it than the economy could absorb without experiencing a general rise in prices. This is NOT my opinion or interpretation, by the way --- it is indeed historical fact. Please go Google "Price Revolution", and read the facts for yourself; I am sure you will find more than enough evidence of it in very short order.

I am amused, however, by your bizarre and dogmatic insistence that "quantity is not what determines value". Evidently, you have never heard of "supply and demand", a concept familiar to the rest of the world, in which the amount of a good does in fact influence price (value) --- the greater the quantity (supply) of a good, at a constant demand, the lower the value (price) of that good in the market. Money can, and usually does, respond to exactly the same market forces as any other good.

Not totally true, the Romans were cutting coins for hundreds of years, then demanding payment of taxes in gold coins while they circulated copper and silver washed coins to replace them. Read my link above on Diocletian and his edicts, debasement and price controls. Though gold remained the preferred and hoarded store of wealth.

Interesting chart. I would like to offer this link to a recent interview with Catherine Austin Fitts that relates, albeit at a higher, broader level. One of her better interviews that I have read/heard, and worth a look.

WHO NEEDS VOTER FRAUD, WHEN YOU HAVE THE STUPID SHEEPLE DESPERATLY LOOKING FOR SOMEONE TO ABUSE THEM POLITICALY, TAKE AWAY THEIR FREEDON, AND MAKE PEONS OF THEM, THEIR FAMILY, AND ALL THEY WORK FOR THEIR ENTIRE LIFE.....THEY WANTED TO BE LIED TO, AND THEY WANT TO BE LEAD BY FALSE MESSIAHS, THEY WANT TO BE ABUSE AND NEGLETED. THE NEED TO BE TAKEN ADVANTAGED OF, OTHERWISE THEY WILL NOT BE HAPPY......THAT IS THE AMERICAN WAY NOW....